Seeking Alpha

Zillow slides following new Citron Research report

  • In a report (.pdf) modestly described as "the most comprehensive and thoughtful piece on Zillow (Z -3.1%) ever published," Citron Research declares the online/mobile real estate platform's Q2 a "complete disaster," argues its rapid top-line growth is only due to skyrocketing sales/marketing spend (now 70% of revenue), and declares Zillow lacks the operating leverage of a Google, Facebook, or LinkedIn.
  • Citron also notes Zillow only has an estimated 13.5% share of real estate site Web traffic (no site has a dominant share), highlights recent insider selling, and declares social media usage by realtors is "killing" the company (Premier Agent sub growth is nonetheless quite strong).
  • Citron first took aim at Zillow in Sep. '12, when shares were trading at $44.41. They're up 114% since then.
Comments (9)
  • cmpas2
    , contributor
    Comments (26) | Send Message
     
    All of these things have been noted elsewhere and most acknowledged by the company in their last few calls.
    20 Sep 2013, 11:09 AM Reply Like
  • chicagomary
    , contributor
    Comments (79) | Send Message
     
    I wonder how much of this "report" is a play to drive down price for shorts?
    20 Sep 2013, 11:15 AM Reply Like
  • rambler1
    , contributor
    Comments (395) | Send Message
     
    Seeing quite a bit more of it on SA & as the market trends higher.
    20 Sep 2013, 11:24 AM Reply Like
  • James Sands
    , contributor
    Comments (1911) | Send Message
     
    Too many competitive factors and too early in the social, mobile environments to put full faith in Zillow and Trulia.....
    20 Sep 2013, 11:09 AM Reply Like
  • Stone Fox Capital
    , contributor
    Comments (5768) | Send Message
     
    Mostly know info and why investors were crazy to be paying over $100 for the stock, but nothing damaging to the long-term prospects. In fact, the note about only having 13.5% of the market is actually very bullish. Somebody is going to consolidate the industry and thats the goal of Z spending extra on S&M. Still predict that Z will hit $10B in market cap in the next few years.
    20 Sep 2013, 01:07 PM Reply Like
  • me39
    , contributor
    Comments (76) | Send Message
     
    Full disclosure, I didn't read the report and this is based on the headlines.

     

    Citron made its name by uncovering fraud. Citron does not have the track record to be credible when it comes to calling shorts for valuation or business model reasons. Zillow's website may not be perfect and we all know it is not the best source for MLS listings. But Zillow and Trulia are light-years ahead of their competitors on user experience and non-MLS listing data. Zillow has a strong brand and is becoming synonymous for real estate search much in the same way Google is synonymous for running a general internet search. Long-term Zillow bulls are not long Z because it is cheap on current multiples. We believe that Zillow is going to dominate its market, which is still in its infancy and has the potential to generate tens of billions in revenues.
    20 Sep 2013, 01:40 PM Reply Like
  • Intangible Valuation
    , contributor
    Comments (612) | Send Message
     
    What about TRLA?
    21 Sep 2013, 06:31 PM Reply Like
  • shound1030
    , contributor
    Comments (3) | Send Message
     
    I guess always room for a contrarian view,but if you had taken Citrons advice you have missed out on 50 bucks a share.
    As long as they keep increasing traffic and time on site the value is there and will continue to grow.
    Real monetisation will come later
    21 Sep 2013, 04:27 AM Reply Like
  • kurt.mcfarlane
    , contributor
    Comment (1) | Send Message
     
    Keep drinking the Kool-Aid. Zillow is a sad excuse for MLS listings (try Redfin, at least they give you money back). If Zillow was so great, they'd be generating growth organically instead of selling their ridiculously overpriced stock to buy companies that don't fit their bulls eye. It's a squeeze right now and once its done, look out below.
    21 Sep 2013, 04:55 AM Reply Like
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